Oil market could tip out of balance on rising non-Opec production

Gladys Abbott
November 15, 2017

It is certainly true in the passenger vehicle segment and in power generation, but it is not true in the other two elements of oil demand: "transportation and petrochemicals". However, this is expected to cut only 2.5 million barrels per day, or about 2%, off global oil demand by that time.

"It is far too early to write the obituary of oil, as growth for trucks, aviation, petrochemicals, shipping and aviation keep pushing demand higher", said Fatih Birol, executive director of the Paris-based IEA.

The IEA states that the shale oil revolution in the U.S. continues thanks to the "remarkable ability of producers to unlock new resources in a cost-effective way".

The IEA also today released its latest World Energy Outlook, in which it said global oil demand will fall modestly due to the rise in electric cars. But the oil market isn't tightening as quickly as once anticipated, the IEA said in its monthly oil-market report.

The price of oil has risen over 30 percent since June to a two-year high of around $57 a barrel in NY trading amid evidence of stronger economic growth around the world.

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Worldwide, oil consumption is seen reaching 97.7 million bpd in 2017, up 1.5 million bpd from 2016.

In Abu Dhabi on Monday, the UAE Minister of Energy and Industry Suhail bin Mohammed Faraj Faris Al Mazrouei, said that oil producers were expected to unanimously extend a production cut accord later this month, but its duration was still under discussion. But analysts expect the price to not rise much further in coming months as the US ramps up production. The IEA estimates that there will be 50 million electric vehicles on the road by 2025 and 300 million by 2040, from closer to 2 million now. Next year, demand is seen hitting 98.9 million bpd, up 1.3 million bpd from this year. Scientists just this week said that emissions of the heat-trapping gas rose this year after three years of not growing.

A study by Bank of America Merrill Lynch forecasts that pure electric vehicles would achieve a global penetration of 12 per cent in 2025, 34 per cent by 2030 and 90 per cent by 2050.

Analysts also noted that oil prices were being pressured by a global commodities selloff, led by base metals like nickel and copper, due to weaker-than-expected economic data from China.

Having said that, the IEA points out that over the next 25 years, the world's growing energy needs will be met first by renewables and natural gas "as fast-declining costs turn solar power into the cheapest source of new energy electricity generation".

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